If a California Court of Appeal ruling stands, the state’s prevailing wage law will be greatly expanded beyond the original intent and historical interpretation of the statute. The result would be increased costs for development projects throughout the state.

In a case involving the Rosedale housing development in the Azusa hills, the appellate court ruled that an entire private master development is a “public works” if any public funds are used for any construction done under the contract within the overall development.

The court determined that payment of public funds toward construction of one public improvement within a development necessitates the payment of prevailing wages on all other public improvements within the development even if those projects are privately financed.

Historically, prevailing wages have been required only on specific projects that were paid for wholly or in part with public funds. Public improvements that were built entirely with private funds and later given to the public were not subject to prevailing wage mandates.

In the Azusa situation, Mello-Roos funds were used to pay for a portion of the public improvements. But only $71 million of the total cost of $146 million was available for them. The Mello-Roos funds were dedicated toward some of the public projects, while other specific projects were privately funded.

If the court had held to precedent, only the specific projects funded by Mello-Roos would be subjected to prevailing wage rates. The other projects, funded entirely by private money, would not have come under the prevailing wage law.

The prevailing wage law in California can add considerable expense to construction projects. In many other states, the “prevailing wage” is the average rate paid to construction workers in an area. But that is not the case in California, which uses a formula that effectively results in a mandate that developers pay union wage rates that often are far higher than the average rate of pay.

In the Azusa case, the $75 million in private developer funds for specific individual public improvement projects, which the developer was obligated to build and donate as a condition of approval for the development, are now subject to the prevailing wage law.

The California Department of Industrial Relations has been promoting an expansion of the prevailing wage law for a decade. But until last month, no appellate court has agreed. In fact, earlier rulings by the court of appeal and the California Supreme Court did not endorse such an expansion of the wage law.

What is needed now is a clear interpretation of the scope of the prevailing wage law by the state’s highest court. We trust it will rule in favor of the historical use of the law and limit it to specific public improvement projects paid for with public funds and not subject privately funded public improvements to the law.